Journal of Corporate Renewal

Sept

2016

continued on page 8

If or when Brexit happens, it will require
perhaps the most significant review and
revision of U.K. legislation ever undertaken.

• The U.K. does not join the EEA.

On leaving the EU, the U.K. would become a "third country" for purposes of the BRRD, and EU member states would become "third countries" for the purposes of the Banking Act 2009. One of the consequences of the U.K. being a third country would be that, in accordance with Article 55 of the directive, financial institutions regulated in the EU that incurred liabilities under English law contracts would have to seek the inclusion of contractual recognition of bail-in clauses in those English law contracts.

For significant U.K. subsidiaries and branches of non-EEA banks, it is likely that resolution action would be led by the resolution authority where the bank is located. However, it might be necessary for the Bank of England to take actions that recognize or facilitate those resolution proceedings. When it is notified that a third-country resolution authority has taken a resolution action, the objective and results of which are comparable to the exercise of a stabilization option in the special resolution regime, the Bank of England is obliged by the Banking Act 2009 to make a “ third-country instrument” that recognizes the action, refuses to recognize it, or recognizes some parts of the action but not others.

In addition to recognizing a third-
country resolution action, the Bank
of England may exercise one or
more of the stabilization powers
with respect to an entity or branch in
the U.K. of a third-country banking
institution to support third-country
resolution with a view to promoting
objectives which, in the third
country, correspond to the special
resolution objectives in the Banking
Act 2009.

The Bank of England may only
refuse to recognize a third-country
resolution action, and instead take
independent resolution actions
if appropriate if both the Bank
of England and the Treasury are
satisfied that one or more specified
conditions are met, including
where recognition would have
an adverse effect on financial
stability in the U.K. or the action
treats creditors located or payable
in the U.K. less favourably than
creditors with similar rights located
or payable in the third country.

Schemes of Arrangement Schemes already fall outside the scope of the EIR. However, there is uncertainty around whether the European Judgments Regulation (EU 1215/2012) applies to English schemes of arrangement. The courts in recent English scheme decisions have considered jurisdiction both on the

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